Energy shock, uncertainty slow growth in East Asia Pacific: World Bank

Regional growth is projected to slow to 4.2 per cent this year from 5 per cent in 2025 as the energy shock triggered by the Middle East conflict compounds the adverse impact of elevated trade barriers, global policy uncertainty and domestic economic difficulties, the World Bank said in a press release.

The East Asia and Pacific region’s growth is slowing in 2026 due to external shocks, a World Bank Group report said.
Regional growth is projected to slow to 4.2 per cent in 2026 from 5 per cent in 2025.
Growth in China is projected to decelerate from 5 per cent in 2025 to 4.2 per cent in 2026 and 4.3 per cent in 2027.
Prolonged conflict may further raise economic distress and reduce regional growth.

Growth in China is projected to decelerate from 5 per cent in 2025 to 4.2 per cent in 2026 and 4.3 per cent in 2027 as weak domestic demand and property sector challenges persist, and the global slowdown dampens export growth.

Growth in the rest of the region will slow to 4.1 per cent in 2026 and is projected to rebound to 5 per cent in 2027 as geopolitical tensions ease and uncertainty diminishes, a World Bank release said citing the document.

“Growth in East Asia and Pacific continues to outperform much of the world, even in uncertain times,” said Carlos Felipe Jaramillo, World Bank’s vice president for the region.

“Yet, sustaining growth levels requires countries to confront structural challenges and seize the opportunity of the digital age to increase productivity and create more jobs,” he added.

The impact of the Middle East conflict depends on each country’s reliance on energy imports, existing vulnerabilities, and economic policy flexibility.

Prolonged and intensified conflict may further increase economic distress and reduce regional growth. A sustained 50-per cent increase in fuel prices could lead to a 3-4-per cent loss in income for households in the region.

Targeted support—for both the poor and the vulnerable and the small and medium enterprises—can help those most in need without fiscal strain, the release added.

The bank identifies surging artificial intelligence (AI)-related exports and investment as a bright spot in 2025, especially in Malaysia, Thailand and Viet Nam.

AI could also lead to higher productivity growth, but adoption in EAP remains limited because of gaps in connectivity and skills. Only 13-17 per cent of multinational subsidiaries in China and Thailand currently use AI, which is one third of the proportion in industrial countries.

Fibre2Fashion News Desk (DS)